A very strong set of 1H results released this morning for Amplitude Energy (AEL).

Production & Financial Momentum

Can see the excellent improvement in operations and financial profitability AEL has made over recent years since Jane took over from the previous CEO & her team got on top of the historical Sulphur & fouling issues at the Orbost gas plant they acquired from APA several years back.

I have drawn in estimated full-year FY26 outcomes based on current half’s production. Note this doesn’t include any upside likely from 20% increase in pricing flagged on number of Sole GSA contracts due to kick in from 1^st Jan 2026.

Balance Sheet:

Can see the significant inroads they’ve made from the historical debt for purchasing the Orbost gas plant from APA several years ago (c$460M by memory), and the major decommissioning liability (old BMG field) they had to fund this past 1-2 years out of operating cashflow ($200M+). Have had a little help on this front also from their recent capital late last year (done at $2.695 to help supersize their exploration program & add in a 5^th well “Nestor” with their Otway 50% business partner OG Energy).

Orbost (Sole Gas Field) Production Performance

Clear momentum as they have successfully gotten on top of the historical sulphur & fouling issues that plagued the plant under APA’s ownership & AEL’s early ownership.

They have already had the plant producing above its 68 TJ/day nameplate capacity (recent record of 71 TJ/day), and are looking at low-cost options to potentially increase Orbost’s production capacity higher.

Realised Gas Pricing steadily increasing with inflation & SE Australia market demand

They are also making extra margin on their increased spot gas sales through catering for additional peak demand periods & through partnerships with VIC gas peaker plants to assist with VIC’s intermittent power generation issues from high renewables (especially wind).

Growth Plans

The East Coast Supply Project (ECSP) is their major growth initiative, designed to backfill the substantial latent capacity available at their other major gas plant (Otway) of c130-135TJ/day (currently only processing 15-20TJ/day).

They own this plant outright – and with declining production from existing fields - getting additional gas volumes through the plant is the obvious high-value & low-risk growth option available for Amplitude.

The project stalled under historical 50% joint-ownership with Mitsui (didn’t have the desire to commit capital / risk appetite to proceed) in recent years. Mitsui finally sold their 50% interest in the offshore Otway fields to a new JV partner OG Energy, who after significant due diligence were keen to proceed & took over Mitsui’s interest. As part of this they also agreed to repay/match Amplitude’s cap-ex on the project to date with a free carry ($28M), after which time both parties share costs equally (recent exploration is still being funded under this carry arrangement).

Potential Re-Rate Catalysts

I think lot of analysts & investors were blind-sided by the first well of their big ECSP growth project (Eleanora) coming up a dud. Market reaction was savage (likely suddenly questioning the likelihood of success in the other 3-4 main exploration wells) which had been partly factored in as their major new growth engine.

The ECSP’s next exploration well results (Isabella) are due within days (likely to drop within the next 3-7 days). Given how soon they’ll have this input into their models (and having recently been burned) – I suspect some analysts may await this news, before updating their models & making any bold new calls / price targets (hence potential window of opportunity!).

Second half of year (July-Dec 2026) will see the other 3 exploration wells tapped. If successful, this is likely to de-risk Amplitude’s growth prospects considerably, and result in a material positive re-rating for AEL.

Rest of business is absolutely humming – with increased gas pricing on lot of their contracts from 1^st Jan 2026 – so expecting 2H FY26 to be very strong.

Given ongoing strong performance from their core Sole gas field, may also see another reserves upgrade for it (basically extending its production life) in 2H FY26, which Jane has flagged as a possibility. Would also be well received.

Core business is going great – really for the market I think it’s just laser focused on Amplitude’s future growth project (ECSP) being de-risked and proved up. Once that happens – and depending on the number of successful exploration wells - I think we could easily see a SP 50% above its current levels.

Near Term Price Target: (partly dependant on imminent success with Isabella): $2.50-$2.80

Upon further Exploration success in 2H of CY2026 (other 3 wells): Easily see $3.30-$3.60.

Downside (assuming all ECSP wells fail): $1.80-$2.00 (underpinned by existing very profitable business & reserves). Would also have fallback position of either further exploration (require additional cap-ex) or simply 3^rd party gas tolling through Otway (low-risk but not as profitable) for Beach or others looking to bring online new fields in the area.

Not without risk – but risk-weighted rewards skewed firmly in favour of upside IMO.

Disclosure: Held in SM & IRL portfolio.

Interesting opportunity thrown up today.

Amplitude Energy (AEL, formerly Cooper Energy COE) has had a miss in its first exploration well of the current 4-well campaign in the Otway basin (offshore Victoria).

While disappointing & quite unexpected, I think the market has over-reacted & SP over-corrected - cratering over 20% on the miss.

Core business is doing very well under relatively new manager Jane Noorman (ex STO)'s stewardship, with increasingly pleasing performance from their owned Orbost Gas Plant feeding Sole gas field production through it - formerly was bottlenecked & sulphur issues, but in past 12-18 months they have gotten on top of this issues, debottle-necked the plant & are even now lifting its capacity beyond former nameplate capacity of 68 TJ/day.

Other owned Gas Plant (Orbost) has huge latent capacity (total 150 TJ/day), which is only very partly being utilised. This is the big value kicker if they can backfill this plant with additional gas volumes from current growth initiative & exploration program dubbed the ECSP (East Coast Supply Project). Potential of substantial additional cashflow through the plant, for only the additional cap-ex to get any new fields drilled & tapped into existing nearby pipeline infrastructure.

I think market has over-reacted, and still good chance that 1 or more of the other 3 wells planned to be drilled with current JV partner OP Energy will come good.

Possible opportunity for those with slightly higher risk tolerance, as rest of business has been substantially de-risked - its just the growth premium that's been knocked off assuming entire campaign will be a flop. I don't buy this simplistic narrative & put this at a low probability. Any buying sub $2.75 good value in my opinion & will be rewarded with time.

Growth volumes from ECSP will kick in by early 2028 if successful, and can always toll 3rd party gas through Otway plant as a fall back.

Also my belief is eventually Beach will make a move on Ampllitude, as would complement their predominantly West Coast gas business nicely, and they already have significant expertise in Amplitude's offshore Victorian acreage/area, and could bring their own additional gas volumes through the plants - which they woudl pick up for well below replacement cost.

Good buying at these levels I believe, with multiple re-rate catalysts on horizon - assuming at least one or more of new wells come good.

For anyone interested in the company - a short presentation by the CEO Jane Norman on Tuesday this week done through the "ASX CEO Connect" series.

Provides a great 20 minute overview of the company, where it's at, recent history/challenges overcome, plus prospects, catalysts and growth opportunities going forwards.

ASX CEO Connect March 2025 | Amplitude Energy (ASX: AEL)

The current free cash flow generation figure was particularly impressive (clear numbers now Orbost plant issues mostly resolved & post BMG-decommissioning works), and the ECSP major growth project targeted for drilling starting later this year will be able to be readily joined into the company's existing infrastructure (existing seabed pipeline T's & processed through the company's Athena Gas Plant which has massive spare capacity to be backfilled).

Really positive on Amplitude going forwards, after what was a disappointing & tough few years for shareholders with the Orbost Plant / Sole gas field issues. Onwards & upwards!

19-Apr-2021:  Q3 FY21 Quarterly Report

Key features

• Record quarterly production and sales volume: 46% production increase to 0.77 MMboe and 55% sales volume increase to 0.82 MMboe from increasing Sole production
• Record quarterly revenue: 46% increase to $35.9 million from commencement of the Sole Gas Sales Agreements
• Improving performance of the Orbost Gas Processing Plant: 42 TJ/day average processing rate in March 2021, up 63% from the prior quarter*; further increases expected during CY2021
• Extension of Transition Agreement with APA to 1 May 2022: working together to increase processing rate at the Orbost Gas Processing Plant with the objective of achieving nameplate capacity of 68 TJ/day
• Athena Gas Plant Project on schedule and on budget: ~65% complete at quarter-end
• FY21 guidance maintained: Production: 2.7 – 2.9 MMboe; sales volumes: 2.9 – 3.1 MMboe

* Processing rates exclude downtime for reconfiguration works in Q2 FY21.

Comments from Managing Director David Maxwell

“Cooper Energy re-set its baseline performance during the quarter, delivering record quarterly production, sales volume and revenue.

“Improved performance from the reconfigured Orbost Gas Processing Plant underpinned our record results. Daily Orbost processing rates reached 45 TJ/day and stability improved, albeit with periodic absorber cleans still required. Ongoing plant operating improvements and capital works in FY22 have the objective of achieving further production increases and extending cleaning cycles.

“Commencement of the Sole Gas Sales Agreements in December 2020 and January 2021 was a major milestone which contributed to record quarterly performance. Sole sales revenue increased ~200% quarter-on-quarter due to higher sales volumes and less Sole gas sold on the spot market.

“Cooper Energy continues to execute its gas development strategy in a disciplined manner. With improving performance at the Orbost Gas Processing Plant and increasing cash flow, we are well positioned to continue growing gas supply for the southern markets from our Otway and Gippsland basin acreage,” Mr Maxwell said.

[Click on the link at the top for the full report.  I hold COE shares.]

Also, lately:

12-Apr-2021:  Transition Agreement Extension

15-Feb-2021:  Half Year Results Announcement

Plus:  Half Year Results Presentation   and   Half Yearly Report and Accounts

COE has been doing it tough over the past year, which has little to do with COVID, and everything to do with their issues with getting their Sole gas through the Orbost Gas Processing Plant (OGPP). 

While they have certainly now turned the corner with that issue and are working through both the temporary and permanent fixes for it amicably enough with APA (the operators of the OGPP), they had a rough H1.  Despite that, they're looking to the future, and are accentuating the positives, as you do:

Step-change in production underway

• Record half year production and sales volumes on increased Sole production: Production up 82% to 1.20 MMboe and sales volumes up 86% to 1.21 MMboe (Million Barrels of Oil Equivalent)
• Earnings impacted by Orbost (OGPP) performance: Underlying EBITDAX down 40% to $9.7 million; underlying net loss after tax of $17.4 million (H1 FY20: $2.0 million loss)
• Transition Agreement with APA enabled Sole gas sales agreements to commence: Contracted gas volumes of 19.75 PJ in 2021 delivers step-change in production, revenue and cash flow
• Orbost reconfigured for greater operational flexibility: ~45 TJ/day since February 2021
• Step-change in gas production: Current total gas production rates of ~60 TJ/day, up ~60% on H1 FY21 average daily rate
• Strong growth forecast: FY21 production 2.7 – 2.9 MMboe (FY20: 1.56 MMboe) and sales volume 2.9 – 3.1 MMboe (FY20: 1.54 MMboe)
• Net zero carbon emissions: First domestic oil and gas producer to be carbon neutral
• Growth projects on schedule: Athena Gas Plant >40% complete with first gas expected in Q1 FY22

--- click on the links at the top for more ---

[I hold COE in two of my portfolios, and they are also on my Strawman.com scorecard.  I see them as undervalued by the market based mostly on a temporary setback, so I see upside once they get the gas flowing properly [consistent high volumes, no regular stoppages] through APA's OGPP.  It is in the interests of both parties [COE + APA] to sort this out, and all information I read suggests that they are doing just that, hence the upside once the good news flows along with the gas.]

30-Oct-2020:  Quarterly Activities Report

Key features:

• Quarterly production: up 10% to 0.67 million boe from prior quarter’s 0.61 million boe (barrels of oil equivalent).
• Quarterly revenue: maintained from prior quarter at $24 million.
• Sole: Orbost single absorber trials completed. Commitment to plant reconfiguration works.
• Sole Gas Supply Agreements initiated: to commence from December 2020 and January 2021.
• Athena Gas Plant Project: FID taken and project is 17% complete.
• Carbon neutral in FY20: formal certification underway.

Managing Director’s comments:

“Our results show good progress made against our task list for FY21.

"The August Transition Agreement with APA led to successful single absorber trials, commitment to plant reconfiguration works and preparation for the initiation of the Sole gas supply agreements from December. FID has been taken on the Athena Gas Plant Project, which is now underway and first gas is expected in under 12 month’s time. Our gas production and revenue has continued to grow notwithstanding the lower spot gas prices.

“The achievement of Carbon Neutrality for our operations in FY20 was the culmination of extensive research and engagement with shareholders and carbon offset project providers. We are delighted to achieve carbon neutrality through a high-quality domestic project with long term benefits to a region of major environmental significance. We are now working with the relevant bodies to secure formal certification of this status.

“The coming months are expected to see the pace of activity pick up as Orbost plant works are conducted, then Sole production resumes and we initiate the Sole term gas sales contracts”.

--- click on link above for the full report ---

Also today:  (30-Oct-2020)  COE: Sole GSAs commencement and Orbost plant work commitment

These links are to today's announcements via Cooper Energy's own website:  https://www.cooperenergy.com.au/investor-information/asx-announcements

[I hold COE shares.  They are trading at a decent discount to their peers due to the issues they are having with the Orbost Gas Processing Plant (OGPP) which are addressed in today's announcement.  As I have stated before, the issues are temporary IMO, not structural, and it is in the interests of both APA (the operators of the OGPP and the associated gas transmission pipelines) and COE to get this sorted ASAP.  I view both SXY (Senex Energy) and COE (Cooper Energy) as excellent exposure to increasing Australian east coast and south east coast Natural Gas demand, which should lead to higher prices over time, so I hold both.  I view COE as the bargain stock in the sector due to their current OGPP issues.]

19-June-2020:  Sole Orbost Update 19 June 2020

APA have advised COE of some issues with the commissioning of the Orbost Gas Processing Plan which will result in another 6 day shutdown - starting tomorrow or Sunday - and that the plant may need further modification - which could take up to 3 weeks (offline). 

I hold COE shares and I view these issues as temporary, not structural.

21-Apr-2020:  Quarterly Activities Report

Also:  21-Apr-2020:  APA: APA Market Update - Change to Earnings Guidance

31-Mar-2020:  Business Update

11-Mar-2020:  Sole Gas Project update

10-Mar-2020:  Presentation to 2020 Euroz Rottnest Institutional Conference

06-Sep-19:  New gas field discovery at Annie

As expected, that has been a positive catalyst for COE.  They closed up 6% at 62 cents on that news, but traded today as high as 68.5 cents, some 17% above the 58.5c they closed at yesterday.

While the discovery of new commercial gas deposits is always a nice surprise, they were drilling between two currently producing gas fields - so not a total surprise that they found gas there.  

I'm a happy owner of COE - which have good management - and provide excellent exposure to Australian domestic east coast gas demand.

18-Feb-2020:  Sole Gas Project update

I hold COE shares.  This is a game-changer for COE.  Not long now!  Good exposure to Australian east coat natural gas demand.  Good management.  Smaller player, becoming bigger. 

Pendal (the old BT / Bankers Trust) became substantial holders of COE shares on Feb 10.  Other current substantial shareholders include Mitsubishi UFJ Financial Group (who bought the Colonial First State Global Asset Management [CFSGAM] business from CBA and have now rebranded it as First Sentier Investors), Greencape Capital, CBA and Challenger (ASX:CGF).  There's some smart money on the register.  Their MD, David Maxwell, owns over 22 million COE shares, and every other board member is also a shareholder, with one (Hector Gordon) owning over 4m shares.  They have skin in the game.

12-Aug-2019:  Cooper Energy FY19 Full Year Results release

Full Year Statutory Accounts

FY19-FY20 Outlook Investor presentation

Disclosure:  I hold COE shares.

17-June-2019:  Sole Pipeline Update

Sole Gas Project Update    

• Pipeline repair and pipeline testing activities complete 

 
Cooper Energy (ASX: COE) advises the offshore activities to undertake the repair and testing of the Sole subsea pipeline have been completed.  
 
The offshore component of the Sole Gas Project is forecast to be within the budget cost of $355 million.   Work on the onshore element of the project by APA to upgrade the Orbost Gas Plant to process gas from Sole is advancing.  APA have advised Cooper Energy that the plant will be ready to receive and process the first Sole gas in the September quarter 2019.  APA and Cooper Energy continue to work closely to ensure the safe and reliable completion of the Sole Gas Project. 

--- ends ---

Disclosure:  I hold COE shares.

05-June-2019:  Gas sales agreements with AGL Energy